I'm pretty certain they would be telling the truth about the processor on the device listening for the command locally. It would chew way too much battery and data to run the translation all the way back to googles servers and back.
Now, if you were to interject wondering if it listened to other keywords and recorded that... it would be interesting. (Although, with the open source nature of the product, I'm certain someone would catch this behaviour before anyone was at any real risk).
I am a huge apple fan, but these conviences are making me starting to take both feet out of the Apple Sandbox.
-Handsfree requests! Siri just isn't useful enough for day to day scenarios, plus the lag from finding your phone to holding down the home button. It would be nice to just say your keyword and instantly start your task.
-Accelerometer activated camera? Brilliant. Yes it's fast to fire up the the screen on the iphone, and then slide the camera icon... But when you need to get that really fast photo, I think this gesture could be awesome!
iPhone 5S will hopefully come with some serious improvements, or I'll be grabbing a Google Play edition of something. HTC One? Moto X? (Even an S4?)
Further conjecture. I cannot wait until the marketting gurus have to pit the iPhone 5S vs the Samsung S5!
5S vs S5 shoot out! Who Wins? We got to confused to remember!